Atlantic Canada should abandon government liquor monopolies

It’s time to focus on preserving public safety while permitting a market system to thrive through the entire supply chain, from producer to consumer

By Alex Whalen and Ian MadsenAtlantic Institute for Market Studies

In October 2012, Gerard Comeau left his home in Tracadie, N.B, and drove to Quebec to buy alcohol. Comeau, a retired power lineman, knew he could buy the same alcohol for less in Quebec. However, upon returning to New Brunswick, Comeau was stopped by the RCMP and charged a $292.50 fine.

By bringing cheaper alcohol back to New Brunswick, Comeau undermined the New Brunswick Liquor Corp. (commonly known as Alcool NB Liquor or ANBL) liquor monopoly in his province. He also violated an outdated interprovincial trade law.

Comeau’s case has received considerable public commentary and is being considered by the Supreme Court of Canada.

AlexWhalen

Whatever the Supreme Court decides, one thing is clear: change is overdue for Atlantic Canadian provincial liquor monopolies.

In our recently-released study, published by the Atlantic Institute for Market Studies, we recommend taking steps toward a free-market system for liquor retail, wholesale and distribution.

The study estimates that the four Atlantic Canadian liquor corporations could fetch as much as $5 billion if sold on the open market. This is the combined total of the four provincial monopolies and demonstrates their immense value to provincial treasuries. (In addition to ANBL, they are: Nova Scotia Liquor Corp., or NSLC; Newfoundland and Labrador Liquor Corp., or NLC; and Prince Edward Island Liquor Control Commission, or PEILCC).

AIMS’ polling on the Comeau case shows that Atlantic Canadians are dissatisfied with the status quo and are tired of the costly pricing imposed by provincial liquor monopolies.

The study details problems with monopolies, such as inefficiency, higher prices and lack of variety. The system is anti-market and violates the spirit of free trade within Canada.

The four provincial Crown corporations have controlled almost all aspects of liquor retail, wholesale and distribution in Atlantic Canada since Prohibition ended. They bring in hundreds of millions of dollars to the provincial governments each year. This profit comes directly from consumers, who pay above-market prices.

IanMadsen

Getting government out of retail liquor sales would be a good first step. For starters, it would open up opportunities for small businesses. No doubt many Atlantic Canadian entrepreneurs would jump at the opportunity to be liquor retailers. It would also mean consumers could buy cheaper, more varied products, at more stores, increasing convenience.

Divestment doesn’t have to come all at once. In the study, we recommend that Atlantic Canadian liquor corporations begin by selling their retail operations, dealing with divestment of the wholesale and distribution operations later.

Other provinces have successfully divested themselves of liquor stores. The Alberta government did it in 1993 and Albertans show no sign of wanting to turn back. The Albertan consumer can buy a wider range of alcohol products (almost 22,000) at a greater number of locations (2,100) than ever, with no detectable increase in alcohol-related social ills.

Emulating the Albertan model, which is also widely used in the United States, is a good first step. Throughout much of the U.S., state-level governments are responsible for licensing producers, wholesalers, distributors and retailers. This approach focuses on preserving public safety while permitting a market system to thrive through the entire supply chain, from producer to consumer.

Following this example would allow Atlantic Canadian governments to focus more effectively on their natural role as guardians of public safety. They could regulate and license liquor wholesalers, distributors and retailers, instead of trying to be all of these things at once. That would provide much-needed business opportunities for Atlantic Canadians and reduce costs for consumers.

Change is overdue and consumers deserve better. Other jurisdictions have shown that different models can work. In many areas of public policy, Atlantic Canada is too satisfied with the status quo. It’s time to take advantage of the opportunity presented by the Comeau case and achieve some progress.

Alex Whalen, JD, is operations manager at the Atlantic Institute for Market Studies. Ian Madsen, CFA, is an independent financial analyst. They are co-authors of the latest AIMS study, An Analysis and Valuation of Atlantic Canadian Liquor Monopolies. Read more at AIMS.ca/liquorvaluation.

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